Bitcoin Custody Assumptions Wrong

Hidden Assumptions in Custody Arrangements

This memo is published by CustodyStress, an independent Bitcoin custody stress test that produces reference documents for individuals, families, and professionals.

Assumptions About Backup Integrity

Every custody arrangement rests on assumptions. Some are explicit—this backup is stored here, this person knows that information. Others are implicit—the backup is still readable, that person can still be reached. When bitcoin custody assumptions prove wrong, gaps appear between what the holder believes and what is actually true. These gaps can be catastrophic if discovered only when access is needed.

Testing assumptions reveals their status. But many assumptions go untested for years or decades. The holder proceeds as though their mental model matches reality, never checking whether the correspondence holds. When assumptions fail, they often fail silently until a recovery attempt exposes the mismatch.

---

Assumptions About Backup Integrity

Holders assume their backups work. The seed phrase was written correctly. The metal backup was engraved accurately. The digital file was saved without corruption. These assumptions feel obvious—of course the backup is correct. But feeling obvious does not make assumptions true.

Transcription errors affect handwritten backups. A letter misread, a word misspelled, a number transposed—small errors render backups useless. The holder who never verifies their backup may carry corrupted information for years without knowing.

Physical backups degrade. Paper fades, ink bleaches, metal corrodes, and engravings become illegible. A backup created properly may not remain proper over time. Assumptions about durability depend on material properties that vary and change.

Digital backups face their own vulnerabilities. Bit rot affects storage media. File systems can corrupt. Encryption passwords may be forgotten while the file remains accessible. A digital backup that exists may not be a digital backup that works.

---

Assumptions About People

Custody arrangements often involve other people—family members holding keys, advisors knowing procedures, services maintaining infrastructure. Assumptions about these people's reliability, availability, and capability pervade many custody plans.

Relationships change. The trusted family member who agreed to hold a backup may no longer be trusted, available, or capable. Divorce, death, estrangement, or simply geographic distance can alter who can be relied upon. Yesterday's trusted party may not be tomorrow's.

Capabilities change too. An aging parent's memory fades. A tech-savvy friend becomes overwhelmed with their own problems. The person who understood their role perfectly may not understand it years later when understanding matters.

Communication assumes reachability. Contact information goes stale. People change phones, email addresses, and physical locations. The holder who assumes they can reach someone may discover at a critical moment that reaching them is not possible.

---

Assumptions About Knowledge Transfer

Holders assume their instructions are clear. The documentation they created makes sense to them. They believe it will make sense to whoever reads it later. This assumption deserves scrutiny because the author cannot fully evaluate clarity from the author's position.

Instructions assume baseline knowledge that readers may lack. Terms that seem basic to the holder may be unfamiliar to heirs. Concepts that seem obvious may not be obvious to someone encountering them for the first time. The gap between author knowledge and reader knowledge is often larger than authors realize.

Implied steps go unwritten. The holder knows to do certain things without being told—check the address, verify the amount, confirm the network. These implicit steps may not appear in documentation because the holder does not think to include what they consider obvious.

Context cannot be fully transferred. Why certain decisions were made, what alternatives were considered, how to adapt when things differ from expectations—this contextual knowledge lives in the holder's mind but rarely appears in documentation. Readers following instructions without context may not know how to handle deviations.

---

Assumptions About Technology

Custody depends on technology—hardware, software, and protocols. Assumptions about technology's persistence, compatibility, and reliability underpin many custody arrangements. Technology changes faster than most holders expect.

Hardware manufacturers may not exist forever. A company that makes hardware wallets today may be gone in a decade. Without the company, support disappears. Firmware updates stop. Replacement devices become unavailable. Assumptions about hardware continuity face mortality of companies.

Software evolves in ways that break assumptions. Wallet interfaces change. Features are added or removed. The software the holder uses today may work differently—or not at all—when heirs need it. Version-specific knowledge may become obsolete.

File formats and storage media present compatibility questions. Can a file created today be read in twenty years? Will the storage device remain functional? Will the computer interface needed to access the device still exist? These questions have no certain answers.

---

Assumptions About One's Own Future

Holders plan based on current capability. They assume they will remember, understand, and be able to execute procedures in the future. But people change. The holder's future self may not match the person who created the custody arrangement.

Memory fades with age. Details that feel permanently etched may become blurry over decades. A passphrase that seemed unforgettable becomes unretrievable. The holder who trusted their memory may discover that trust was misplaced.

Understanding can degrade alongside memory. Technical concepts clear at setup time may become confusing years later if the holder does not regularly engage with them. The system that made perfect sense may become mysterious to its own creator.

Life circumstances change in unpredictable ways. Health problems, cognitive decline, geographic moves, financial changes—any of these can affect the holder's relationship with their custody arrangement. Planning based on current circumstances ignores future uncertainty.

---

Assumptions About Security

Holders make assumptions about what is secure. A storage location feels secure. A password feels strong enough. A procedure feels protective. These security assumptions may or may not correspond to actual security, and the holder often cannot distinguish between feeling and reality.

Hidden in plain sight assumes observers will not recognize significance. A seed phrase backup disguised as something else assumes no one will discover what it actually is. But determined searchers, accidental discoveries, or informed adversaries may see through obscurity.

Physical security assumptions may not account for all scenarios. A safe feels secure until a fire melts it. A bank deposit box seems protected until the bank refuses access. Security measures work against some threats while failing against others.

Threat models are assumptions about what threats exist. Holders defend against threats they imagine while actual threats may differ. The assumption that a particular attack vector is unrealistic may be wrong. Threat perception shapes protection choices, but perception may not match reality.

---

Assumptions About Continuity

Many custody assumptions involve continuity—things remaining as they are. The backup stays where it was placed. The family member maintains their role. The service continues operating. These continuity assumptions face a world that changes.

Storage locations can become inaccessible. A house sold, a safe deposit box closed, a property abandoned—what was stored somewhere becomes unreachable when somewhere changes. Assumptions about persistent access may prove unfounded.

Relationships that seemed permanent end. Marriage, friendship, and family bonds all can dissolve. Custody arrangements that depended on ongoing relationships face failure when those relationships terminate.

Legal and regulatory environments evolve. What is permitted today may not be permitted tomorrow. Access that was straightforward may become complicated. Inheritance that was simple may become contested. Legal continuity assumptions face uncertain futures.

---

Testing Assumptions

Identifying wrong assumptions requires testing. Verification, practice, and periodic review all help surface mismatches between belief and reality. Without testing, assumptions persist untested regardless of their accuracy.

Recovery testing checks backup assumptions. Actually restoring from backup, using only backup materials, proves the backup works or reveals that it does not. This test provides definitive information about a critical assumption.

Documentation review by others tests clarity assumptions. Asking someone unfamiliar with the system to read instructions reveals gaps the author cannot see. Their confusion points to where documentation fails to transfer knowledge.

Regular verification catches drift. Checking periodically that backups are readable, contacts are reachable, and systems function as expected reveals changes before they become critical. Static assumptions meet dynamic reality through ongoing verification.

---

Outcome

When bitcoin custody assumptions prove wrong, gaps appear between belief and reality. Assumptions about backup integrity, people, knowledge transfer, technology, the holder's own future, security, and continuity all pervade custody arrangements. Each category contains numerous specific assumptions that may or may not be accurate.

Wrong assumptions often remain undiscovered until execution. The holder proceeds with confidence based on a mental model that does not match reality. Only when recovery is attempted, inheritance is executed, or access is needed does the mismatch become apparent.

Testing assumptions surfaces problems before they become crises. Recovery testing, documentation review, and regular verification all help align belief with reality. The holder who actively tests assumptions stands better positioned to discover and correct errors than one who assumes without verification.

---

System Context

Examining Bitcoin Custody Under Stress

Not Confident in My Bitcoin Setup

Bitcoin Custody Red Flags

← Return to CustodyStress